Prosperity In Scandinavia Is Despite Welfare States, Not Because Of Them
The following excerpts are republished from Swedish author Dr Nima Sanandaji’s latest book, Debunking Utopia: Exposing The Myth Of Nordic Socialism
From Spain to the Baltics, Latin America and the United States, leftist ideologues and politicians hedge much of their political beliefs on the success of Nordic social democracy. However, in the Nordic countries themselves, this ideal image of democratic socialism has lost its shimmer. What the global Left also doesn’t understand is that a unique culture underlies the success in Nordic countries.
In his latest book, Debunking Utopia – Exposing The Myth Of Nordic Socialism, scholar and author Nima Sanandaji, shows that the prosperity in Scandinavia predates social democracy in the region. He also proves that the reason for prosperity in the Scandinavian countries is not social democracy, as the Left would have you believe, but a culture based on hard work, healthy diets, social cohesion and high levels of trust.
Given below are the first two chapters from the book. These have been published with the permission of WND books. You can buyDr Sanandaji’s book here.
The Nordic Shangri-La
American Obsession With Nordic Social Democracy
During the 2016 Democratic Primary, Bernie Sanders has repeatedly claimed that the Nordic welfare systems are role models for the United States to follow. Already in 2013 Sanders wrote extensively on this point, with reference to a meeting with the Danish ambassador. Among others Sanders explained:
In Denmark, social policy in areas like health care, child care, education and protecting the unemployed are part of a “solidarity system” that makes sure that almost no one falls into economic despair. Danes pay very high taxes, but in return enjoy a quality of life that many Americans would find hard to believe. . . .In Denmark, there is a very different understanding of what “freedom” means. In that country, they have gone a long way to ending the enormous anxieties that comes with economic insecurity. Instead of promoting a system which allows a few to have enormous wealth, they have developed a system which guarantees a strong minimal standard of living to all—including the children, the elderly and the disabled.
The admiration of Nordic social democracy seems to resonate with liberal grassroots, which in turn can explain why Sanders has been able to compete with the much more established, and better funded, candidate Hillary Clinton. This really doesn’t come as a surprise. By pointing to Nordic social democracy as a role model, ideologues on the left can create optimism for the progressive cause in America. They point out that the Nordic model allows for universal health care, fully government-funded education, a system where most workers are part of labor unions, generous parental leave, open-handed unemployment benefits, liberal sick leave benefits and a lavish system with paid vacations. What more could the Left in the United States ask for? Hillary Clinton has tried to position herself in the middle, by combining praise of the Nordic model with a less enthusiastic stand on how far the United States should go in pursuit of democratic socialism. In her own words: “We are not Denmark. I love Denmark. We are the United States of America, and it is our job to rein in the excesses of capitalism.” Ezra Klein, editor of the liberal news website Vox, explained that this dispute “obscured deep similarities,” as “Clinton and Sanders both want to make America look a lot more like Denmark—they both want to pass generous parental leave policies, let the government bargain down drug prices, and strengthen the social safety net. Their disagreement isn’t over whether America should look more like Denmark.”
Hillary and Bill Clinton for their part are also associated to the Nordic countries in the 2016 election cycle. The primary reason is a scandal, where the Clintons are accused of having set up and kept hidden a foundation in Sweden, which has received $26 million, with one of the main contributors being a Swedish government–sanctioned lottery. The Clintons also have ideological ties to the Nordics. Although the two centrist Democrats are careful not to identify themselves as admirers of democratic socialism, they too lean towards the Nordic model. In 1997, for example, Bill Clinton became the first sitting president to visit Denmark. Clinton, who had visited the country already during 1969 as a student, praised Danish policies, saying, “Denmark has been a pioneer in showing the world how a nation can succeed, both in creating a strong economy and a good society that provides opportunity for all its citizens and supports those in need, a society bound together by shared values and respect for real differences. We can all learn from your efforts to educate your people for a lifetime, to give them the tools necessary to make the most of their own lives in a time of global, economic, and technological change.” In his book Back to Work, published in 2011, Bill Clinton went further by explaining that Finland, Sweden, and Norway offer more chances for individuals to out-earn their parents than the United States does.
In 2013 Obama followed suit by making the first bilateral visit by an American president to Sweden. After a joint speech with Sweden’s then prime minister Fredrik Reinfeldt, Obama explained that he admired Sweden’s economic model: “Sweden also has been able to have a robust market economy while recognizing that there are some investments in education or infrastructure or research that are important, and there’s no contradiction between making public investments and being a firm believer in free markets. And that’s a debate and a discussion that we often have in the United States.”
Three years later, in May 2016, Obama hosted the leaders of the Nordic countries in Washington. He continued to praise the Nordic social welfare model, and the open immigration policies of the Nordics. Amongst others Obama said: “We believe in societies that create opportunity for all people, through education, health care, and equal opportunity—including for women. In fact, in a world of growing economic disparities, Nordic countries have some of the least income inequality in the world—which may explain one of the reasons that they’re some of the happiest people in the world, despite not getting much sun. . . . There have been times where I’ve said, why don’t we just put all these small countries in charge for a while? And they could clean things up.” In a story for CNN White House producer Kevin Liptak explained “the northern European nations remain an oasis of liberal cool for [Obama] . . . It’s no wonder Obama is fond of musing to his aides, ‘Why can’t all countries be like the Nordic countries?’”
The admiration shown by Democrat presidents or would-be presidents is however only the tip of the iceberg. For a long time the Nordic countries have been regarded as prime role models by leftist ideologues. I don’t know of any part of the world in which the Left does not view the Nordics as examples of how high-tax social democratic systems are viable and successful. American musician Bruce Springsteen, famous for getting engaged in politics, explained during a tour in Paris that his dream was for the United States to adopt a Swedish-style welfare state. He is joined by many liberal intellectuals and journalists who over decades have built up the image of the nearly perfect Nordics. Time magazine, for example, described Sweden as a social democratic utopia already in 1976, going as far as using the word paradise: “It is a country whose very name has become a synonym for a materialist paradise. Its citizens enjoy one of the world’s highest living standards, and a great many possess symbols of individual affluence: a private home or a modern apartment, a family car, a stuga (summer cottage) and often a sailboat. No slums disfigure their cities, their air and water are largely pollution-free, and they have ever more leisure to indulge a collective passion for being ut i naturen (out in nature) in their half-forested country. Neither ill health, unemployment nor old age pose the terror of financial hardship.”
Do you oppose creating a paradise of wealth and equality? Are you against having a society where no one needs to be financially worried when they are sick, out of a job, or old? Well, who can be? The American Left has created a utopian image of Sweden in particular and the Nordic countries in general. Based on this unrealistic image, they argue that social democracy is superior to a free-market model. Political scientist John Logue stated in 1979, “A simple visual comparison of Scandinavian towns with American equivalents provides strong evidence that reasonably efficient welfare measures can abolish poverty as it was known in the past; economic growth alone, as the American case indicates, does not.” Logue believed that the greatest threat to the Nordic welfare states was that they were too successful; eliminating social problems to such a degree that people forgot the importance of welfare policies.
In 1994 David Popenoe wrote that “Scandinavian welfare and family policies are the envy of [left] liberal-thinking people around the world.” He, “like most American social researchers,” was “largely in support of the Scandinavians’ accomplishments in the area of social welfare.” It might not seem like it, but Popenoe was actually trying to burst the utopian bubble by explaining that there were indeed also drawbacks to the generous welfare systems supported by high taxes. The bubble, however, did not burst, even among top leftist academics. In 2006 Jeffrey Sachs, one of the world’s leading experts on economic development and the fight against poverty, argued in Scientific American that the ideas of free-market economist Friedrich Hayek were proven wrong by the Nordic social democracies: “In strong and vibrant democracies, a generous social-welfare state is not a road to serfdom but rather to fairness, economic equality and international competitiveness.” In 2011 liberal American economic guru Paul Krugman explained, “Every time I read someone talking about the ‘collapsing welfare states of Europe,’ I have this urge to take that person on a forced walking tour of Stockholm.” Journalists with a tilt to the left also add to the equation. During the presidential campaign of 2016, Hillary Clinton was criticized, among others in the Boston Globe, for not being enough of an admirer of the Nordic model.
This list of admirers could be easily extended. Also in other parts of the world, the Nordic model is routinely seen as a great system to follow. I think this is the simple explanation for why my previous writings on this issue have gained so much attention abroad. Again, it would be one thing if people argued in a nuanced way in favor of the welfare states. I myself don’t believe that universal health care or public funding of child care and schooling is a bad idea. As I will explain in this book, one could certainly make a case for the early Nordic model, where low taxes and market-friendly policies were combined with such basic welfare services. Admirers of the Nordic system, however, often go all in, in the utopian myth creation. The leading French newspaper Le Monde has, for example, explained that “only the Scandinavian system is at once efficient and fair.”
Rich Lowry, editor of the right-leaning National Review, recently used Shangri-La as an analogue for the American Left’s view of Nordic welfare states, in an article on Scandinavian unexceptionalism. I think this is a spot-on description, at least for the most vivid foreign advocates of Nordic-style social democracy.
The high regard among the admirers of welfare state policy around the world, from Asia to Europe to Latin America, comes as no surprise. Nordic societies are uniquely successful. They characterized not only by high living standards, but also by other attractive features, such as low crime rates, long life expectations, high degrees of social cohesion, and even income distributions. Various international rankings conclude that they are among the best, if not the best, places in the world in which to live. One example is the Better Life Index, compiled by the Organization for Economic Cooperation and Development (OECD). In the 2015 edition of the index, Sweden was ranked as the nation with the second-highest level of well-being in the world. The other four Nordic countries also made the top ten global list. Another example is the 2015 edition of Mothers’ Index Rankings, where Save the Children rates nations based on how favorable their social and economic systems are for mothers and children. Norway ranks as the best country in the world in this regard, followed by Finland, Iceland, Denmark, and Sweden. The Nordics have been on top in previous years also.
If one disregards the importance of thinking carefully about causality, the argument for adopting a Scandinavian-style economic policy in other nations seems obvious. The Nordic nations—in particular, Sweden, which is most often used as an international role model—have large welfare states and are successful. This is often seen as proof that a third-way policy between socialism and capitalism works well, and that other societies can reach the same favorable social outcomes simply by expanding the size of government. If one studies Nordic history and society in depth, however, it quickly becomes evident that the simplistic analysis is flawed. The social success of Nordic countries is, as will be shown systematically throughout this book, rooted deeply in their history and was apparent long before the adaptation of large welfare states. Although welfare states certainly provide some benefits, to a large degree much-admired societies in the north are successful despite, not thanks to, their policies.
Top Ten Countries: OECD Better Life Index 2015
7. United States
8. New Zealand
Source: OECD Better Life Index
Nordic Success Predates Large Welfare States
Democratic presidents and would-be presidents, liberal academics, journalists, and Hollywood celebrities who admire Nordic social democracy all make a simple assumption: if America adopts Nordic policies, American society will shape into a Nordic society. To paraphrase the movie Field of Dreams, “If you build it, he will come.” But does this assumption make sense? Italy, France, and Greece also have high government expenditure and welfare states based on socialist ambitions. Why wouldn’t America turn out to be the next Greece, Italy, or France? I am sure there is a point to be made about the benefits of generous welfare systems in these countries. At the same time, it is obvious that social challenges such as unrest, high unemployment, and stagnant growth exist in southern European welfare states. They are far from the Nordic Shangri-La.
Ideologues on the left often simply avoid this question. Bernie Sanders isn’t keen on comparing his policies with those introduced by socialists in southern Europe, although his ideals are arguably more popular there today than in the Nordics. Southern European social democrats have a lax attitude about public spending, while those in northern Europe are fiscally conservative. Which of the two reminds you more of the attitudes of American politicians who want to introduce social democracy? There is also the issue of outcomes. When you think about it, have states in America that have moved toward social democratic policies, such as California, been able to replicate the success of Nordic societies? Or have their outcomes been more in line with the welfare states of southern Europe? Again, the point isn’t to dismiss the idea of welfare programs, but to have realistic expectations on the limits of policy.
To understand the Nordic experience, bear in mind that the large welfare states are not the only thing that sets these countries apart from the rest of the world. The countries also have homogenous populations with nongovernmental social institutions that are uniquely adapted to the modern world. High levels of trust, a strong work ethic, civic participation, social cohesion, individual responsibility, and family values are long-standing features of Nordic society that predate the welfare state. These deeper social institutions explain much of the success in the Nordics. Serious researchers of course understand what ideologues often neglect. One example is Danish scholar Henrik Jacobsen Kleven, a professor at the London School of Economics.
In a paper he explains:
As we continue our efforts to understand and draw lessons from the social and economic success of the Scandinavian countries, it is worth remembering that these countries have some specific traits. They are small and homogenous, racial and religious diversity is limited, human capital is high, and they have been largely unaffected by violent conflict. It is not clear to what degree lessons learned from Scandinavia carry policy implications for large, diverse, and unequal countries such as the United States. Certainly the political economy surrounding the implementation of the policies proposed here would be different in the United States—indeed this is partly why we observe stark policy differences to begin with—and conditional on political feasibility, the effects and appropriate design of those policies might be different in the United States. Hence, replicating the Scandinavian policies and institutions in societies that are fundamentally different is unlikely to be achievable or perhaps even desirable.
In other words, the Nordic countries’ unique cultural and historical attributes explain why they are successful. Therefore, it is wrong to assume that adapting a large Nordic welfare state would turn the United States into a Nordic society. The author also hints that one reason why the Nordic countries have adopted different policies than the United States might be precisely because their historic and cultural attributes make them more suited to large welfare states. It makes sense, doesn’t it? If you have homogenous societies with strong working ethics, healthy lifestyles, and high levels of trust it is more feasible to introduce a generous welfare system than if you have heterogeneous societies where a significant part of the population, to give just one example, have unhealthy lifestyles and therefore create high costs for universal health care. Of course, the United States can introduce a Nordic-style social democratic model, but we shouldn’t expect this to be as successful as in the Nordics.
The next part of this book will explain the origins of this unique culture of success, and how it allows Nordic Americans to be at least as affluent and socially successful as their cousins in the Nordics. This chapter will make two simple, but striking, points. The first is that the success of the Nordic welfare state, much admired by the Left in America and elsewhere, predates the welfare state. The Nordic countries became economically and socially successful before they transitioned to large welfare states. A historic view shatters the utopian illusion of how successful social democracy has been in the Nordics. The second point is that social and economic success is indeed concentrated to northern Europe, but not necessarily to countries with socialist policies.
Take Switzerland, as an example. In chapter 1 we learned that Switzerland has the fourth-highest level of well-being in the world, according to the OECD Better Life Index. In some areas, such as employment rate and living standard, Switzerland outperforms the Nordic nations. Switzerland has a similar culture and climate to the Nordic nations, but vastly different policies. It is a conservative country both culturally and economically. The Swiss system stresses individual responsibility, strong families, and a competitive market economy rather than a large welfare state. This of course has both merits and disadvantages. One thing we can observe is that Switzerland is achieving much of the social success that the Left admires. Why shouldn’t America be more like Switzerland? Why not, for that matter, Australia, which according to the same index has the highest well-being in the world? Australia also has market-oriented policies and a small welfare state.
It is also worth comparing Iceland with the other Nordic societies. The isolated island, which was populated by Viking sailors in the late ninth century, has arguably the most uniquely Nordic culture in the world. Yet it has never embraced large welfare states to the same extent as its larger cousins. Iceland certainly faces many challenges: it is far from other places, has too small a population to create a specialized economy, most of its lands are inhabitable, and, well, it is covered with ice. Large parts of its surface are barren and unfruitful. Sure, Iceland has geothermal energy, but it has few mineral resources and lacks the oil wealth of places such as Norway and Alaska. Still, as this chapter will demonstrate, the country is in many ways as successful, sometimes even more, as its cousins with larger welfare states. Given all its disadvantages, for example, Iceland is only a little less affluent than its Nordic cousins, even somewhat ahead of Finland.
An interesting fact about the Nordics that is seldom acknowledged by the admirers of social democracy is that the countries have not always had large welfare states. Welfare state institutions such as public schooling were gradually introduced in the late nineteenth century and the first half of the twentieth century. The extent of welfare policies was, however, not exceptional. Instead it was in line with the introduction of similar policies in other parts of Europe, and for that matter, in the United States. The common measure of the size of government is how much of the total economy—that is to say, the gross domestic product (GDP)—goes to taxes. By looking at this measure, we can conclude that the size of government was about the same in the Nordic countries as in the United Stated during the mid-twentieth century. The point where policies started to differ is somewhere around 1960. At this time point the size of government was similar in the Nordics to the United States, while afterwards the Nordics gradually built up a larger public sector, funded by higher taxes.
So we have established a year when the taxes in the Nordics were still relatively low, 1960. Let’s also establish another year, when the Nordic welfare states were at their peak. This occurred somewhere around the year 2000. At this time taxes in the United States had remained on about the same level as in 1960, while those in the Nordics had nearly doubled to close to half of GDP. Since then at least Sweden has substantially reduced its tax burden and the scope of the welfare state. By comparing 1960 to 2000, we can see how much of the social achievements of the Nordics came before and after the shift toward big government. It is, of course, also interesting to look at the present situation. So what do we find if we look at some broad measures of social success?
Long Life Spans Due To Large Welfare States?
In late 2015, the Public Broadcasting Service (PBS) ran a story entitled “What Can the U.S. Learn from Denmark?” by the Associated Press. The AP explained, “Danes were excited this week to see their calm and prosperous country thrust into the spotlight of the U.S. presidential race when Democratic hopefuls Bernie Sanders and Hillary Clinton sparred over whether there’s something Americans can learn from Denmark’s social model.” The story continued by stating that “Danes get free or heavily subsidized health care” and “compensation when they’re unemployed, out sick from work or on parental leave.” Additionally, they have longer life spans than Americans. Now, all these statements are certainly true. The only problem is that many assume that these facts are directly correlated. Danes have universal health care and government compensation when sick. Correspondingly they live longer than Americans. So, for the United States to raise its life expectancy, perhaps a Danish model should be adopted? After all, what kind of heartless monster would you be to oppose policies that increase people’s life spans?
I am myself in favor of the public sector providing health care, and for that matter, sick leave compensations, particularly to the less well off. But the simplistic comparison troubles me. As it turns out, according to the latest available data, Danes have on average 1.5 years longer life expectancy than Americans. However, during 1960, when the country actually had slightly lower taxes than the United States (27 percent in the United States compared to 25 percent in Denmark), the difference was even larger. At this time Danes lived 2.4 years longer than Americans. How many admirers of the Danish high tax model are aware that the shift toward massive taxation and a correspondingly generous welfare state has led to a smaller difference in life expectancy than before? How many are even aware that Denmark used to have lower taxes than the United States?
Interestingly, Denmark is not alone in this regard. When Nordic countries had similarly sized public sectors as the United States (1960), Swedes lived 3.2 years longer than Americans while Norwegians lived 3.8 years longer. Today the difference has shrunk to 2.9 years in Sweden and 2.6 years in Norway. This analysis isn’t sensitive to what exact year we choose. Finland, a war-torn and poor country at the time, had one year’s lower life expectancy than the United States and has now almost two years longer, since it has caught up with its Nordic cousins. Iceland is even more interesting. Icelanders went from having 3.7 years’ longer life span than Americans in 1960 to 4.3 years longer today. So, does this fit in with the idea that large welfare states promote long life spans? Well, let’s not forget that Iceland is the Nordic country that, over time, has had the smallest welfare state, with least leaning toward social democracy.
Instead of solely comparing with the United States, let’s compare with the world. The table on the next page shows the top ten countries with the longest life spans during three periods. In 1960, when the Nordics had small welfare states, Norway had the highest life expectancy in the world, followed by Iceland in second place, and Sweden and Denmark in fourth and fifth. In 2000, during the peak of the Nordic welfare states, Norway and Denmark had dropped out of the top-ten league. Sweden had fallen to tenth place and Iceland to fourth. The latest data shows a similar picture, except that Iceland has again climbed to second position. Pretty interesting, huh? Just for the sake of curiosity, do we find in general that countries with large welfare states have the longest life spans today? We do not. Japan, which currently has the highest life span, has conservative, family-oriented policies and relatively low taxes. The same is true for Switzerland, which has the third-highest life span; Singapore, which has the fifth highest; and Australia, which has the seventh highest. Instead of politics, the common feature seems to be that these are countries where people eat healthily and exercise. Perhaps this shows that systems that put emphasis on big welfare states as well as systems that put emphasis on market economy, individual responsibility, and family-oriented policies can achieve long life spans. Or perhaps it shows that politics cannot fully solve our problems. Social outcomes are to a large extent determined by the choices that people make, which in turn is influenced by culture. A country cannot just copy the policies of another country and hope to gain the same social outcomes.
Top Ten Countries With Longest Life Span
Long Nordic life expectancy is anything but a mystery. Much as in 1960, the populations in this part of the world combine healthy diets with a love of nature and sports. The Icelandic people do live in a cold country, with large, barren, volcanic fields that resemble the fictional Mordor from Lord of the Rings, yet, they enjoy going out in this nature. Also, they eat a healthy diet based largely on fish. That Denmark has fallen out of the global top-ten list in life expectancy doesn’t come as a surprise either. It is not because Danes have such a well-funded universal health care sector that they say, “The hell with it; let’s live unhealthy lives.” The explanation lies in culture. The Danes are famous for enjoying life more than their Nordic cousins. This goes hand in hand with high rates of alcohol consumption and smoking.
Certainly, having some sort of system where people who are sick are given treatment is vital for public health. Preventive health care interventions by the welfare state—for example, where individuals at risk of future health problems are identified and encouraged to change their diets and lifestyles—can have great effects. But large welfare simply doesn’t translate to high life expectancy. If that were the case, Danes would live longer than Swedes, who in turn would live longer than Icelanders. The opposite is true. Once we realize this, perhaps American admirers of the Nordic model should change their perspective: Instead of trying to copy Nordic policies, why not copy their healthy lifestyles? Wouldn’t Americans be healthier if they exercised more, took hikes in nature, walked to the store on occasion (as Nordic people often do) instead of driving, and ate less junk food and more fish? If anything, isn’t it remarkable that the difference in life span is so small—and has shrunk over time—given that Americans have much less healthy lifestyles? Perhaps some Americans would like to continue having an unsound diet and hope that Nordic-style social democracy can improve their health. I very much doubt that would be the case.
Low Child Mortality Due To Large Welfare States?
Besides life span, another common measure of how well societies are doing is child mortality. The levels of child mortality basically tell us three things:
- how good and how widely available health care is for mothers;
- how many parents go to the hospital to give birth rather than stay home; and
- what share of mothers have issues such as alcoholism, smoking, and drug abuse, which could seriously hurt their infants.
Much like life expectancy, the United States doesn’t come on top on this indicator.
The child mortality rate in America is 5.6 among 1,000 children. This is twice the rate in Denmark and Sweden, three times that of Norway and Finland, and nearly four times that of Iceland. Again, the simple argument could be: “In America more than twice as many children die at a young age as in the Nordics. Therefore, if you aren’t in favor of Nordic-style social democracy, you don’t want to protect children.” Now, perhaps Americans could learn a thing or two from Nordic maternal care. But isn’t the obvious problem the poverty, and related addiction to alcohol and drugs, which exists in particular among marginalized minorities in the United States? One could of course argue that poverty would vanish if a larger welfare system existed in America. But where is the proof? Have states with higher taxes significantly reduced social ills? Why not?
Again, we can turn to a global analysis. The following table shows the top ten countries with the lowest child mortality at different times. We can see that the five Nordic countries all have among the lowest child mortalities in the world today. The same situation existed during the peak of welfare policy and when Nordic countries had the same low taxes as in the United States. Over time Denmark and Sweden, the two Nordic countries with the highest tax burden, fall behind somewhat, while Iceland goes from third to first position globally. And again, countries such as Singapore, Japan, and Korea, which have small public sectors, also make the top ten list. Clearly the Nordics are successful societies whose achievements are to be admired. But this success existed before the transition to high tax systems. Doesn’t this tell us something?
Top Ten Countries With Lowest Child Mortality Rates
Equality Due To Large Welfare States
Admirers of Nordic societies in particular point to the countries’ even income distribution. Certainly, by distributing incomes and providing services such as universal health care, the welfare states do contribute to more equal incomes. Much like long life spans and low child mortality, however, even income distribution evolved in the Nordics before the transition to large welfare states. Historic data on income equality only exists for a small number of countries. Therefore, it is not possible to look at how the global top-ten list has evolved over time. Swedish economists Jesper Roine and Daniel Waldenström have, however, been able to compare historical rates of income inequality in Sweden, the United States, Canada, France, and the Netherlands. Their findings are quite astonishing. Already by 1920, well before the existence of a large-scale welfare state, Sweden had among the lowest levels of inequality within this group of countries. The two economists wrote, “We find that, starting from levels of inequality approximately equal to those in other Western countries at the time, the income share of the Swedish top decile drops sharply over the first eighty years of the twentieth century. Most of the decrease takes place before the expansion of the welfare state and by 1950 Swedish top income shares were already lower than in other countries.”
A recent paper by economists Anthony Barnes Atkinson and Jakob Egholt Søgaard similarly looks at the evolution of income equality in Denmark. The authors find that income equality evolved in Denmark during the last part of the nineteenth century and the first half of the twentieth century. Most of the shift toward higher equality happened before the introduction of a large public sector and high taxes. The same paper explains that equality in Sweden and Norway mainly grew until 1970; that is to say, during the period when the Nordic welfare states were still relatively modest in size. The shift toward equal incomes continued somewhat until the mid-1980s, and has since reversed to somewhat higher inequality. In short, for all three countries equality mainly evolved before large welfare states.
My brother, Tino Sanandaji, wrote in another study: “American scholars who write about the success of the Scandinavian welfare states in the postwar period tend to be remarkably uninterested in Scandinavia’s history prior to that period. Scandinavia was likely the most egalitarian part of Europe even before the modern era. For example, it was the only major part of Western Europe that never developed full-scale feudalism and never reduced its farmers to serfdom.”
Historic data for income equality only exists for a few countries, but modern data is easier to find. On the next page the present top-ten list of the most equal economies are shown. Certainly we can see that the Nordic countries all have equal wealth distributions. There is also another group of countries that share the top-ten list, namely Slovenia, the Slovak Republic, and the Czech Republic. Slovenia, in fact, has the highest income equality in the world. The common feature between these two groups of countries is not welfare policy or income distribution. Slovenia, the Slovak Republic, and the Czech Republic have lower, and relatively flat, taxes. What they do share with the Nordics is homogenous populations. A homogenous population means that the majority of citizens share the same culture. When this is the case, unsurprisingly, incomes are likely to be more similar than in countries with big differences in culture. In fact, we know that the large differences in culture in the United States is a main cause of high inequality.
Why do American ideologues and politicians on the left want to copy Nordic policies rather than the policy of Slovenia, which has the highest income equality in the world? Is it because they prefer the policies of Denmark, where taxes amount to 51 percent of the economy (the highest rate in the world) over those in Slovenia, where taxes are 37 percent? Why not be inspired by the Czech Republic, with a 34 percent tax rate, or the Slovak Republic with a 31 percent tax rate? Could it be that they prefer a high-tax system? Or is it because they don’t understand that the common feature is the high level of homogeneity among populations whose cultures emphasize individual responsibility? What, exactly, is responsible for this culture of success in Nordic societies? What—other than the common answer, social democracy—explains the admirable social outcomes they expe- rienced even before introducing large welfare states? The next part of this book attempts to answer this question through a historical outlook and a comparison between Nordics on both sides of the Atlantic.
Top Ten Countries With Lowest Income Inequality 2010-2014 Average (Latest Data)
5. Slovak Republic
6. Czech Republic
Source: OECD Stat Extract
These excerpts have been published with the permission of WND books. You can buy Debunking Utopia: Exposing The Myth Of Nordic Socialism here.
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